With the Insurance Act of 2015 unveiled this week we at High Gear are happy to see some practical changes that insurers are to consider. Referred to as “the biggest reform to insurance contract law in more than a century” by UK government this policy has been created in a joint venture between Law Commission and Scottish Law Commission.
The focuses of the act are centred on disclosure in non-consumer insurance contracts; warranties and fraudulent claims. In a mission to instil fair practice across the board the Act has successfully cemented clarity in the policy formation process.
New disclosure duties
One of the largest points pressed on in the Act is insurers' disclosure duties, a section that encourages the insured to be more active than even before. Under the ‘duty of fair presentation’ the Act tells how previous insurers (and brokers by extension) would have to write in risk factors, making assumptions in many areas of the calculation process.
With this creating a tone of mistrust in the UK insurance industry new legislation aims to create transparency.
Out-law.com explains how these guestimates had a great impact of how the industry practices..
'Previously, insured parties were required to disclose every circumstance that they knew, or ought to have known, which would influence an insurer in fixing a premium or deciding whether to underwrite a risk. This required insured parties to predict, without much guidance, what factors a hypothetical prudent insurer would be influenced by. The same obligation extended to brokers acting on behalf of insured parties.'
Part 3 of the new Act states:
'Before a contract of insurance is entered into, the insured must make to the insurer a fair presentation of the risk. The duty imposed by subsection (1) is referred to in this Act as “the duty of fair presentation”.
Putting a lot more focus on the Insured the Act is arguably supporting the insurance industry, taking the pressure of in-house due diligence demands.
To read the full, official 2015 Insurance Act follow this link and share your opinions with us at High Gear - http://www.legislation.gov.uk/ukpga/2015/4/pdfs/ukpga_20150004_en.pdf